Real estate investing is in many ways still a very local endeavor. Despite the achievements made by some turn-key companies and others, many investors still just work locally. The real estate investing community in any locale can therefore be very tight knit. Everyone has at least heard of, if not met, the other investors and players in the local market. And word gets around about everyone.
They get around because the plain truth is that people like to gossip. Everyone talks to everyone else. Investors talk to other investors. Your attorney talks with other attorneys. And your CPS talks to other CPAs. The same goes for your contractors when they see other contractors over at Home Depot. They all discuss what they are doing and what you are doing. They may not directly name you, but it all eventually comes out; the good, the bad and the ugly.
What Gets Around?
What sorts of things and I talking about?
- If corners are cut, or not.
- When legal “grey areas” are crossed into.
- If bills are paid or not.
- If anyone has been “screwed” over.
All of these things of course affect your reputation. And reputations in the real estate business mean a lot because much of what we do is based on trust. Trust that others will uphold a contract or deliver a good rehab for example. But your reputation is not built by you alone. It is also reflected by those you choose to work with.
Assumptions Will Be Made
Like it or not, you will be judged by the company you keep. Even if nothing is known about a particular real estate investor, if they use certain attorneys, contractors and others, assumptions will be made.
Imagine the following scenario. You are interested in a property bought to you by a wholesaler. How would you feel about the deal if your attorney told you that “He uses so and so as a closing attorney. That attorney is thorough. There should be no problem.” Now imagine the opposite. What if instead your attorney said “He used so and so as a closing attorney! We need to look at this deal a lot more closely.” How will this affect your dealings with this wholesaler?
Or think about this. Would you rather have the building inspector at ease or on high alert at one of your projects due to the contractor you are using? A building inspector’s discretion can cost you a lot of time and money. By using people with a solid reputation you put the building inspector at ease and you are more likely to be the recipient of their good discretion. That discretion can mean a lot for any project.
Bad News Travels Fast
Bad news, especially in a close knit industry such as real estate investing, travels quickly. Reputations can be made or lost very quickly. Once lost, a reputation can be very hard to get back. Using people with solid reputations is just the way to go. Yes, they may cost more on the front end but only thinking about cost is short sighted. Smarter investors also remember how much, time, effort and money is saved on the back end over an investing career by using people who do not cut corners and have good reputations. Smarter investors work hard to preserve their reputations. Sure, we can all get fooled once, be we are the fools if we let the fooling continue.
